Block: Redefining Credit with Behavioral Underwriting

Challenging the Status Quo: Why Traditional Credit Scores Fall Short for 100 Million Americans

The contemporary financial landscape, marked by rapid digital transformation and evolving consumer behaviors, increasingly exposes the limitations of traditional credit scoring systems. For decades, the financial industry has largely relied on static credit files that provide a retrospective snapshot of an individual's financial conduct. However, as articulated by Brian Boates, Chief Risk Officer at Block, these bureau-based models were fundamentally designed for a more deliberate economy and struggle to adequately capture the fluidity and speed of modern financial transactions. This inherent anachronism results in significant gaps and disconnects, posing challenges for both lenders striving for accurate risk assessment and borrowers seeking fair access to capital.

These discrepancies are far from trivial. Estimates suggest that nearly 100 million Americans find themselves excluded from accessing affordable credit due to the rigidity of conventional scoring methodologies. The crux of the issue, according to Boates, lies not within consumer financial behavior itself, but rather in the archaic tools employed to evaluate it. When the analytical focus shifts towards near real-time data, a more granular and accurate understanding of how individuals manage their finances and, by extension, their creditworthiness, emerges. This perspective advocates for a critical re-evaluation of the foundational principles underpinning credit assessment in the digital age.

The Generational Divide: Younger Consumers and Evolving Credit Preferences

The growing disconnect between traditional credit models and actual financial behavior is particularly pronounced among younger demographic cohorts. Generation Z, having observed the financial implications of revolving credit on preceding generations, demonstrates a discernible skepticism towards conventional credit cards and long-term debt accumulation. This generation actively seeks alternative financial instruments that align with their preferences for immediate settlement and spending within their means.

Empirical evidence supports this behavioral shift. Data from Afterpay, a Block subsidiary, reveals that over half of Gen Z consumers report experiencing an "ick" feeling towards credit cards, with a substantial 63% migrating towards alternative payment solutions. The rising prominence of debit card usage further underscores this trend; Afterpay data indicates that debit cards facilitate 90% of U.S. purchases made through its platform. This strong preference for leveraging existing funds rather than incurring revolving debt signals a fundamental divergence from the credit-centric behaviors that traditional scoring systems are designed to measure. For Block, these patterns serve as a compelling indicator that conventional credit scores are becoming increasingly misaligned with contemporary consumer financial practices.

Behavioral Underwriting: A New Paradigm for Financial Inclusion

In response to these systemic limitations and evolving consumer needs, Block has pioneered an alternative framework centered on 'behavioral underwriting.' This innovative approach redefines creditworthiness by evaluating an individual's financial conduct on a daily, continuous basis, rather than relying predominantly on historical bureau data. As Boates elucidates, "We’re using near real-time data to gain a better understanding of customers and their behaviors, from spending patterns to cash flow and beyond, to make better, more informed decisions."

By prioritizing leading indicators over delayed financial reports, Block endeavors to broaden access to credit without concomitantly elevating risk profiles. This method tracks behavioral signals often overlooked by traditional assessment tools, focusing on dynamic aspects of how individuals earn, save, spend, and repay their obligations in real-time. This holistic and adaptive evaluation enables a significant expansion of credit accessibility while maintaining robust risk management protocols.

The Data Points That Matter Most: Precision in Modern Credit Assessment

In practice, Block's underwriting methodology is predicated on a focused yet continually monitored set of financial signals. Within Cash App, for instance, these signals are synthesized into an internal 'Cash App Score.' This proprietary score is derived from an intricate analysis of earning, saving, spending, and repayment activities across the platform’s extensive user base, which boasts 58 million monthly active users.

The efficacy of this behavioral approach is quantifiable. Boates highlights that this methodology has facilitated a 38% increase in Cash App Borrow loan approvals, all while maintaining loss rates comparable to those observed under traditional credit underwriting. Crucially, behavioral underwriting transcends a singular, static judgment. It is an evolutionary process, dynamically adapting to customer behavior. As an individual's financial habits improve, their access to credit can expand; conversely, the emergence of cautionary signals can lead to a contraction of credit, allowing for agile adjustments in risk decisions.

Scaling with Responsibility: Achieving Growth Without Compromising Integrity

Block’s lending operations are no longer nascent experiments but mature, scaled initiatives. Across its diverse platforms – Cash App Borrow, Afterpay, and Square Loans – Block has collectively facilitated access to over $200 billion in credit globally. Yet, as Boates underscores, quantitative scale alone does not constitute the primary objective. The true measure of sustainable financial inclusion, he argues, extends beyond the sheer volume of loans originated. Instead, it is predicated on the success of those loans and the sustained willingness of consumers to continually engage with Block for their financial requirements.

Illustrative of this commitment to responsible lending is Afterpay’s performance during the 2025 Black Friday and Cyber Monday period, where an impressive 96% of U.S. Pay-in-4 customers either repaid their purchases early or precisely on schedule. This metric exemplifies the successful integration of behavioral insights with consumer responsibility.

The Ecosystem Advantage: Integrated Financial Intelligence

The synergistic advantage of Block’s integrated ecosystem is fundamental to the operationalization of behavioral underwriting at scale. The interconnectedness of Cash App, Afterpay, and Square provides a comprehensive, continuous panorama of financial activity across a spectrum of use cases. This allows Block to discern intricate patterns and correlations in financial behavior that would remain opaque to isolated lending entities.

Furthermore, this ecosystem incorporates inherent safeguards. For instance, missed payments on Afterpay automatically trigger a pause in borrowing privileges. Credit limits are dynamically adjusted based on demonstrated repayment behaviors. Cash App Borrow typically initiates with modest loan amounts, progressively expanding only as customers consistently exhibit reliable financial conduct. This layered approach minimizes risk while fostering responsible borrowing habits.

Measuring Success and Charting the Future of Lending

For Block, the ultimate indicators of success are multifaceted, encompassing repayment performance, sustained customer engagement, and positive long-term financial outcomes, rather than a singular focus on short-term origination growth. Behavioral underwriting facilitates the continuous monitoring of these critical metrics, enabling proactive adjustments rather than reactive responses based on historical data. This real-time visibility ensures that lending decisions remain aligned with an individual's current financial reality.

Peering five years into the future, Boates anticipates a continuous refinement of responsible underwriting practices, particularly as consumer expectations evolve and the economic influence of Gen Z expands. He posits that the essence of "good credit" resides at the confluence of responsible lending strategies and the judicious utilization of financial tools. In his profound assertion, this advanced approach is not merely a transient FinTech advantage but represents the inevitable trajectory for the future of lending, promising a more equitable and dynamic financial ecosystem for all.